There is a combination in Washington that draws fraud, waste and abuse like bees to honey. The combination is free money plus government bureaucracy. The federal farm subsidy program has created some stories that are as unbelievable as they are outrageous.

Your Government at Work

As we discussed in part two of this series, farm subsidies encourage overproduction because farmers are paid by the amount of crop produced. So while the system is unintentionally increasing the number of acres being planted, it is also paying farmers not to plant. The government spends around $2 billion a year for fields to remain empty:

Such fields cover about 5 million acres of North and South Dakota. Nationwide, there are 34 million acres in the conservation reserve, an area equal to about 7 percent of U.S. land that's planted in crops. That's an area bigger than the state of New York.

That was in 2005. The Heritage Foundation puts the number of acres left empty at around 40 million now. That's equal to all the farms in Indiana, Michigan, Ohio and Wisconsin. Removing farmland from production was one of Franklin Roosevelt's first priorities. It seems it may be being done now in the name of conservation.

Another program that seems to be conflicted is the crop insurance program and disaster aid payments. In 2000, Congress was trying to eliminate disaster aid, so they increased the subsidy on crop insurance by 300 percent. But then, in a stroke of genius, went ahead and approved $40 billion in disaster aid. While we currently pick up 60 percent of the premium for the farmers that participate in the program, it seems the insurance companies are gaming the system:

The program seems to have been designed to aid insurance companies and harm taxpayers. Insurers are allowed to pass high-risk policies on to the gov­ernment while keeping for themselves the low-risk policies that are likely to be profitable. Conse­quently, since 1998, the participating companies have earned $3.1 billion in profits, while Washing­ton has lost $1.5 billion. Additionally, since 1998, Washington has paid nearly $20 billion in premium subsidies and more than $6 billion to cover the insurance companies' administrative costs.

All in all, the crop insurance program spends $3.34 for every $1 in paid claims—and it still has not prevented $40 billion in disaster aid.

Only the federal government would sign on to a losing plan like this year after year.

Millionaire Farmers? Try Billionaire.

David Rockefeller is a rich, rich man. He is the grandson of oil tycoon John D. Rockefeller and is estimated to be worth $2.5 billion dollars. And he has received over half a million dollars in subsidies. According to the Topeka Capital-Journal, 56 of the richest Americans have been cut a check from the government:

Included in that roster are banker-philanthropist David Rockefeller Sr.; five members of Wal-Mart founder Sam Walton's family; hotel czar William Barron Hilton; Microsoft co-creator Paul Allen; and nine members of the Pritzker clan of Hyatt Hotel fame.

Like them, most of the other billionaires either made or inherited their fortunes in ways unrelated to the tilling of soil or any other agricultural pursuits.

Instead, they qualified for the payments through their investments or other holdings, or via conservation programs that pay landowners to keep their acreage fallow to protect wildlife or curb runoff.

William Barron Hilton is the grandfather of Paris Hilton. Paris Hilton is likely to inherit some of your hard-earned tax dollars. Ready to stop farm subsidies yet?

There are numerous examples of people who don't need the money collecting huge sums of taxpayer dollars:

Billionaire Lee Bass cashed in an acceptable $242,787. That was in a two year period.

And Ken Lay was also sent farm subsidies. He took in around $20,000, three times more than the average farmer.

Voting Yourself In

There seems to be a serious conflict of interest involved with a Congressman or Senator voting for something that will line their pockets with taxpayer dollars. According to USA Today, eight Senators and four Congressmen collected $6.2 million in subsidies over a ten year period. There seems to be some sneakiness involved with the process also:

Members of Congress must report sources of income totaling more than $200, but most get payments through partnerships or other entities, so it can be difficult to learn which ones receive the subsidies. Recipients are searchable by name on www.ewg.org, but, for example, payments to Sen. Blanche Lincoln, D-Ark., are listed under her maiden name, Lambert, at a Virginia address near Washington.

Records show Lincoln and her family members collected $715,000 from 1995-2005, the most recent year complete data are available. She said she personally received less than $10,000 a year, and the subsidies ended in 2005 when her land was sold.

Here's a list of the members of Congress and how much they looted from the national treasury.

Dead Farmer Walking

In July of 2007, the Government Accounting Office discovered something about the farm subsidy program. It turns out, the government was still paying farmers after they had died. And it wasn't just a small amount. It was over a billion dollars in subsidies. Over a seven year period, the Department of Agriculture paid $1,100,000,000 in subsidies to farmers who had shuffled off this mortal coil. Of the 73 estates checked by the GAO, sixteen has received over $200,000 in subsidies, and 4 topped $500,000. The Department of Agriculture also paid $400,000 to a soybean and corn farm in Illinois after the owner had died in Florida in 1995! The farm just told the government that the owner was "actively engaged" in the day to day operations of the farm.

An Indiana corporation that was owned entirely by one person never notified the government of the owner's death in 1993 and continued to collect unspecified payments for a decade before new owners filed for farm benefits. The government made $567,000 in payments to an Alabama estate over seven years on behalf of an owner who died in 1981. Another estate continued to receive unspecified payments on behalf of a person who died in 1973 -- more than three decades ago -- without any investigation or review.

In a letter that the Department of Agriculture prepared in response to this report, they claimed "the payments were not necessarily examples of fraud or abuse and that auditors did not prove any specific cases of cheating." The payments were, however, examples of how the government treats your tax dollars and how government programs create unnecessary waste.

'cowboy starter kits'

The final example of the insanity of the federal farm subsidy program is what is going on in Texas. In 2006, the Washington Post reported that the government has paid $1.3 billion in subsidies to people who don't even farm:

Even though Donald R. Matthews put his sprawling new residence in the heart of rice country, he is no farmer. He is a 67-year-old asphalt contractor who wanted to build a dream house for his wife of 40 years.

Yet under a federal agriculture program approved by Congress, his 18-acre suburban lot receives about $1,300 in annual "direct payments," because years ago the land was used to grow rice.

Matthews is not alone. Nationwide, the federal government has paid at least $1.3 billion in subsidies for rice and other crops since 2000 to individuals who do no farming at all, according to an analysis of government records by The Washington Post.

Some of them collect hundreds of thousands of dollars without planting a seed. Mary Anna Hudson, 87, from the River Oaks neighborhood in Houston, has received $191,000 over the past decade. For Houston surgeon Jimmy Frank Howell, the total was $490,709.

Some folks initially refused to take it and were informed it would just go to other people. They now accept it but use it to fund local scholarships. A real estate agent is using the attraction of government money to sell houses. As a marketing gimmick, how can free money go wrong?

At a housing development rising from old rice fields on the outskirts of El Campo, 70 miles southwest of Houston, local real estate broker John K. Petty purchased a 75-acre tract from investors in July 2002. He held on to it for a few months, then carved it up and resold it for housing.

"At one time, the area was all farmed in rice," Petty said. Now, the dusty tract is perfect for what he calls "cowboy starter kits," residential tracts owned by nonfarmers but still large enough to keep a horse in the back yard.

Petty informed potential buyers that because their land had once been an active rice field, they could collect an annual payment from the USDA on the portion that was not developed. They did not have to grow rice or anything else.

Billionaires collecting hundreds of thousands of dollars, paying farmers not to farm and dead people collecting checks lead me to believe that the system needs to be put out of our misery. Reform isn't an option. We've seen the damage this program is doing to the family farm and now we can see just a glimpse of the wasteful bureaucracy involved. And consider this: it's been going on since 1929.

Tomorrow:America's Farm Subsidies and the World Economy

(This is part three of a five part series. Here are links to part one and part two.)